The Indian-born novelist Kiran Desai triumphed last night by winning the £50,000 Man Booker prize with her second novel, The Inheritance of Loss, a story replete with sadness over globalisation and with pleasure at the surviving intimacies of Indian village life.

She beat the bookies, who put her fifth out of six in the award shortlist, rating her as a 5/1 outsider, compared with odds of 6-4 on Sarah Waters' The Night Watch, the favourite.

At her first attempt Desai, 35, not only became the youngest woman to win but achieved a victory which repeatedly eluded her mother. The esteemed Indian novelist Anita Desai - to whom The Inheritance of Loss is dedicated - has been shortlisted three times for the Man Booker.

On hearing the result Desai said: "The debt I owe to my mother is so profound that I feel the book is hers as much as mine. It was written in her company and in her wisdom and kindness."

This year's head judge, Hermione Lee, left no doubt that it was "the strength of the book's humanity" which gave it the edge after a long and passionate debate among the judges. "It is a magnificent novel of humane breadth and wisdom, comic tenderness and powerful political acuteness," Professor Lee said. "Her mother will be proud of her."

John Sutherland, chairman of last year's Man Booker judges and author of How to Read a Novel, said: "Desai's novel registers the multicultural reverberations of the new millennium with the sensitive instrumentality of fiction, as Jhabvala and Rushdie did previous eras ... It is a globalised novel for a globalised world."

But, he said, his favourite on the shortlist was Edward St Aubyn's Mother's Milk.

Rodney Troubridge, buyer for the bookshop chain Waterstone's, said Desai's win "continues the fine tradition of Booker winners set in India, such as Heat and Dust, Staying On, The God of Small Things, and Midnight's Children. It's a great winner".

Desai spent seven years writing the novel. The loss in her title is chiefly the loss of faith in India felt among the legions who overstay tourist visas and become illegal immigrants in the US. Her story counterpoints the lives of an embittered old judge, a survivor of British colonial rule, with those of his loyal cook and the cook's son, one of the immigrants who scrabbles for subsistence on developing world pay in New York.

Desai has said in interviews that her title "speaks of little failures, passed down from generation to generation.

"The novel tries to capture what it means to live between east and west. It explores what happens when a western element is introduced into a country that is not of the west, which is what happened, of course, during colonial times and is happening again with India's new relationship with the States."

Announcing the longlist of 19 books on August 14, Prof Lee said: "It's a list in which famous established novelists rub shoulders with little known newcomers."

On September 14, when the shortlist of six titles was published, it became evident that she and her fellow-judges had done something rare in the 38-year annals of Booker: they had dumped the famous writers and picked mainly little-known newcomers.

Hisham Matar (with his first novel, In The Kingdom of Men), Desai, and MJ Hyland (with her second novel Carry Me Down) sprang from almost nowhere to be strong contenders for the world's foremost literary award. Out went Peter Carey, a previous double Booker laureate, his chance of a third title for Theft: A Love Story destroyed. Discarded too was the bookies' favourite, David Mitchell, with his fourth novel Black Swan Green.

But the publishing market treats novelists as promotable contenders with their first and second books, mature talents by their third, and burned out with their fourth and subsequent titles. This year's passed-over favourite, The Night Watch, was a fourth novel.

Few of those who have read all the titles disagree that the relative newcomers Matar, Desai, Hyland, and St Aubyn were sound choices. The question left by the contest is whether new talent is in danger of being overexposed too soon.

The other shortlisted novelist was Kate Grenville for The Secret River.

Apart from Prof Lee, Goldsmiths' professor of English literature and Fellow of New College, Oxford, the judges were: Simon Armitage, poet and novelist; Candia McWilliam, novelist and former winner of the Guardian fiction prize; the critic Anthony Quinn; and the actor Fiona Shaw.